Bankruptcy Filings Approach Record High

Bankruptcies in several U.S. cities are fast on the track to beat record highs, with more and more individuals and businesses declaring bankruptcy even just three weeks before year-end.

In Florida's Middle District, for example, the local bankruptcy court has reported that bankruptcy filings have just overtaken last year’s. At the current rate, 2010 filings may surpass 2009 by about 6%.

A total of 61,978 bankruptcies were filed in the district in November alone, whereas 61,690 were filed throughout 2009. In 2005, before bankruptcy laws were drastically changed, there were 63,778 bankruptcy cases in the Middle District.

Jacksonville Bankruptcy Bar Association chairman Jerrett McConnell said they didn't think they would see bankruptcies even approach 2005 levels again. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted that year precisely to curb bankruptcy filings, mostly by tightening qualifications and requirements.

Most experts point to the slow recovery from economic recession, housing crunch, and the continued rise in unemployment nationwide as the main reasons for the surge in bankruptcy filings. McConnell says he has heard from many clients who have struggled in the wake of the recession, with hardships pushing them into what he calls a "financial death spiral" that’s all but impossible to escape.

Many of these clients, McConnell said, are otherwise financially stable. They simply ran into slight hardships that were aggravated by the economic recession, and ended becoming much more complex situations.

Bankruptcy attorney Robert Wilcox said that falling values in real estate and other investments have also affected people’s ability to deal with financial shock. Realizing that their wealth is running low gives them the idea that bankruptcy is the only way they can handle their debt, he said.

 

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